BSE LiveOct 22, 16:00
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Dear fellow shareholder
The annual report that you behold is a Special one-for you, for me, and for all of those who have been associated with Polycab India over the decades. It is Polycab’s first as a Listed Company.
Your Company’s initial public offering (IPO) of Rs. 13,453 million was subscribed 52 times (excluding anchor portion) in an overwhelming response. The issue received bids for over 918 million shares against the total issue size of 25 million shares. The reserved portion for qualified institutional investors was subscribed 97.78 times (excluding anchor portion), while retail investors subscribed 4.35 times.
On 16 April 2019, the first day of trading on the BSE and NSE,the Polycab share opened at Rs. 633 on both exchanges, hit the intra-day high of Rs. 667.80 before closing at Rs. 654.80, up 22% over the issue price of Rs. 538.
To all of you, welcome to Polycab.
2018-19 has been stellar
As has been detailed and explained in the following pages, your Company climbed new heights of business and Financial excellence in fiscal 2018-19 (FY19).
In FY19, net revenue from operations rose 18% to Rs. 79,560 million from Rs. 67,703 million a year ago and profit after tax was up 40% at Rs. 5003 million from Rs. 3,586 million. In each of the Last 5 years, in not a single year have Polycab’s revenue and profit not improved on the previous year.
As has been the case for a few years now, the demand scenario continued to be challenging, yet your Company once again responded in FY19 with all-round improvements in Liquidity, asset management, profitability, and Leverage. This was because we reduced our debt burden, and improved our management of receivables, and focused on profitable growth through acquisitions of quality clientele and better realisation. Also Helping was our differentiated, enhanced product mix being driven by a committed sales and distribution network to institutional and retail customers. The fact that we manufacture in-house most of our products allows us to provide guarantees of quality, service and short-notice supply that few competitors can match.
More hearteningly, even as we maintained our Leadership in markets for electrical wires and cables, the share of FMEG, a business we entered only 5 years ago, in Polycab’s total revenues grew from 0.3% in FY14 to 8% in FY19, to Rs. 6,433 million at a CAGR ofll6%. Polycab’s evolution from a Largely B2B play to a Large B2C brand is thus on a firm, fast track.
Our growth into an emerging consumer electricals powerhouse has also been driven by investments in branding and marketing. For example, Polycab’s investment in the Indian Premier League (IPL) since 2016 has provided a huge Lift to our brand’s visibility in households. Helping us get the eyeballs is in no small measure owing to our brand endorsers, all star actors: Paresh Rawal since 2014 for wires; R Madhavan since 2018 for fans; and Ayushmann Khurrana for switchgear in 2019.
Our positioning Line ‘Connection Zindagi Ka, created in 2014, continues to resonate in the minds and hearts of our customers.
Capturing the multi-market opportunity
With our scale, efficiencies, quality, and wide product portfolio that offers a one-stop electricals solution for customers and contractors, and a Logical synergistic backward integration and expansion that Leverages our strengths for future market and product scenarios, we see several business opportunities.
The Indian markets for the FMEG products we make and ofwires and cables are similar in size and potential. But your Company has 12% of the wires and cables market and a mere 1% of FMEG markets in which we are present. The market for wires, estimated at 1.5% of GDP, is expected to grow (according to research from CRISIL) at nearly 15% in the next 5 years with increasing share of organized players. Between FY18 and FY23, the estimated annual growth rates for our FMEG markets are: fans at 7%; Lighting and Luminaires at 7%; and switches and switchgear at 9%-again, with the organized sector growing relatively faster. Going by the current growth rate of our FMEG business, increasing brand presence and fast acceptance, Polycab is well set for a formidable role in India’s FMEG sector.
At the macro Level, India is demonstrating continued GDP growth with a fast growing urban population.
The increase in consumer spending, infrastructure growth, industrial investments, and the inevitable rise in nuclear, more affluent families will drive demand for innovative and premium products of the kind manufactured and sold by Polycab.
Polycab’s way of doing business is to keep it simple: drive revenues; manage costs; improve efficiencies; build the brand and make it highly visible; enhance distribution; and thereby create value for stakeholders. Our strategy:
Consolidate our leadership position in wires and cables by targeting key growth domestic and export sectors such as mining, oil and gas, shipping, power, renewables, infrastructure, construction, automotive, telecommunication and agriculture. We will expand our customer base by utilizing our research and development capabilities to develop new and innovative products.
Continue to expand our FMEG business in India and abroad by Leveraging our brand, distribution network, diverse customer base and manufacturing capabilities. The focus will be to broaden our distribution reach, increase rural penetration, and expand our retail footprint.
Strengthen brand recognition by increasing brand awareness and customer Loyalty through creative promotions and new-age marketing using both digital and traditional channels and increased one-to-one interactions with distributors, dealers and end-consumers.
Underpinning our strategy will be our 24 manufacturing facilities; our 3100 plus strong pan-India network of authorized dealers and distributors; and the 100,000 retail outlets-these will grow as we invest to stay ahead of the curve.
To sharpen our competitive edge, we not only manufacture our products in-house but have also integrated backwards. A good example is the 50:50 joint venture with Trafigura, created in 2016, to produce copper wire rods in a new plant at Ryker, Gujarat. Once fully operational, the Ryker plant will fulfil much of our demand for this critical raw material. Besides, our existing manufacturing includes other key raw materials that go into our fmegs and wires and cables. These include aluminium and aluminium rods; several grades of PVC, rubber, XLPE compounds; Gl wires and strips. The resultant enhanced reputation of being a highly reliable supply chain partner provides us a premium positioning that our industry peers will find hard to emulate.
Polycab’s sustained success over several decades is grounded in our core values of simplicity, teamwork, trust-building, customer focus, and meeting commitments to our different stakeholders. Sticking to these values has given us a unique standing and respectability in our industry and with customers. They play a major role in our success, collaborate as we do with them closely to develop products that are in sync with their changing needs.
For the 119,000 shareholders who have now joined the Polycab family, Let me on behalf of all of us at Polycab assure you of our commitment and service to all. Thank you so much for your overwhelming support. Together, we shall build the Polycab of tomorrow.
Inder T Jaisinghani
Chairman & Managing Director